Back in business: Shuaa makes Dh3.6m profit

Dubai-based investment bank Shuaa Capital has announced a small profit for the third quarter of 2013, marking two consecutive profitable quarters for the first time since the onset of the financial crisis in 2008.

The bank’s total Q3 net profit stood at Dh3.6 million, compared to Dh1.3m at the end of Q2 2013. For a year-on-year comparison, Shuaa had made a net loss of Dh13.9m in Q3 2012.

“We are pleased to report two successively profitable quarters. The improved market environment in the UAE drove client activity and our core businesses generated solid results,” said Sheikh Maktoum Hasher Al Maktoum, Executive Chairman of Shuaa Capital.

Driven by an increase in gains from investments in Shuaa-managed Funds of Dh12.1m, interest income of Dh29.3m and net fees and commissions of Dh11.9m, Shuaa reported total revenues of Dh54.8m for the latest quarter, a 57 per cent increase on Q3 2012 of Dh34.9m and 26 per cent increase on Q2 2013 of Dh43.4m.

“Shuaa’s positive performance reflects the progress we have made on strategic, operational and financial initiatives. We are encouraged to see higher quality fee and interest income generation during the quarter, which now accounts for 75 per cent of quarterly revenue. The economic recovery in the UAE balances our revenue expectations for the year and unlocks Shuaa’s operating leverage in our market facing businesses,” he added.

Shuaa also managed to further curtail its operating expenses in the third quarter to Dh41.9m from Dh46.7m for the same period last year. In addition, the group’s strategy of redeploying its balance sheet to grow revenues from lending and the allocation of capital to credit and capital markets, the institutional sales & trading business, resulted in revenue growth across respective divisions.

“From early 2011 until the beginning of the third quarter 2013, SHUAA has been focused on reducing cost to improve its cost to income ratio,” the executive chairman added. The bank said in a medis statement that it continues to focus on cost/income ratio as a key performance indicator. The cost/income ratio saw a double-digit improvement to 76 per cent from 134 per cent compared to the same period in 2012.

“Now that we have achieved a cost to income ratio of 76 per cent, we will start looking at improving the ratio by focusing on income generation. We are well positioned to maintain the momentum that has turned the business around so far. We are maximising our effort to deliver a number of on-going strategic initiatives and work streams across all aspects of the business.  We will stay focused on cost control and balance sheet management, and remain committed to achieving our earnings guidance for the year,” he said.

Shuaa’s total assets stood at Dh1.5bn as of September 30, 2013. Loans, advances and finance leases rose by Dh114m during the third quarter totaling to Dh845m at the end of the period. This, the bank said, was principally due to growth in lending activity of GFC and GIC. Consequently the group’s cash position was down 16 per cent to Dh202m and total liabilities increased from Dh265m to Dh372m over the quarter.

Follow Emirates 24|7 on Google News.